BENEFIT SHARING AND SUSTAINABLE HYDROPOWER Lessons from Nepal June 27-28, 2016 ICIMOD, Lalitpur PADMENDRA SHRESTHA Research and Program Manager
Benefit sharing <> Sustainable hydropower Benefit sharing: how can benefits derived from hydropower projects are shared with mountain communities in a fair and equitable manner? mountain people -negative externalities (socioenvironmental), but do not derive commensurate Social Economic viable energy solution in the Himalayas Failure of trickle down effects Environmental Clean - low carbon energy solution
Benefit sharing and social license to operate Requirements for social license to operate Social expectations Legal requirements Social expectations Potentials for social risk
Defining benefit sharing Compensation Safeguard framework Mitigation Resettlement Action Plan Enhancement measures Budget BENEFIT SHARING The royalty mechanism Equity Investment: local share offers in hydropower projects Support for local livelihood: employment and trainings Community Development, local infrastructure, electrification and water, related benefits Environmental enhancement related benefits (e.g. PES) Revenue Partnership Revenue Profit /Revenue
Lack of uniformity in definition of Benefit sharing World Commission on Dams, 2000 distinguished six sources of project benefits: i) revenue sharing; ii) rights to irrigation and fisheries; iii) jobs and training; iv) preferential access to resources, v) community service; vi) household trainings and loans UNEP compendium Dams and development, 2007 Monetary and non-monetary benefits SWECO (2011) Five categories i) project designs and operations; ii) ancillary investments outside core infrastructure; iii) direct disbursements; iv)institutions and capacity building and v) policy and regulatory framework Very thin line between mitigation measures and benefit sharing
Methodology Field based research at 18 hydropower sites Focus group discussion Participant observation Interviews Government officials (30) a comparative and deductive methodology analytical framework that can describe the major trends and practices of benefit sharing in Nepal. TRIANGULATION Power producers (71) Local citizens (216)
Location of hydropower projects, selected as case studies
Methodology Selection of hydropower projects Location/Geography Mid Western Western Central Eastern 1 7 8 2 Project size Ownership Project Type Historical development Small 1-25 MW Medium 25-100 MW More than 100MW 8 7 3 NEA NEA subsidiary IPP 6 3 9 Storage RoR Peaking RoR Cascade 1 9 6 2 Before 2000 After 2000 Under construction 7 5 6
Hydropower Development in Nepal Time period Political status Hydropower Development Benefit sharing practice Pre 1990s Panchayat Regime All hydropower projects carried out by government through NEA Notify + Compensate 1990-2000 Democracy Entry of private sector in hydropower generation after introduction of liberal economic policies Beginning of benefit sharing practices beyond mitigation 2000-new constitution Peak of Maoist insurgency and start new constitution making process Promulgation of new hydropower policy, but failure to support it with other legal provisions Right based discourse Local community expectations Tested innovations in benefit sharing Current Post Constitution IBN working with global companies GMR, Three Gorges, Sutlej for over 500 MW projects Energy Crisis Mitigation Plan Need for institutionalizing sustainable development and benefit sharing mechanisms
Types of benefits The Royalty Mechanism Government s Single most formalized benefit sharing policy: for collection of royalty from hydropower projects and distribution through local government Equity Investment Financial strategy Social strategy (unique to Nepal) Local livelihood: Employment and Trainings High demand from locals given wide spread unemployment and ubiquitous patterns of labor migration in Nepal Community Development and Local Infrastructure most commonly cited example of benefit sharing, also referred to as CSR by some projects Environmental Enhancements Payment for Ecosystem Services (PES)
Summary of benefit sharing practices SN Project Name Royalty Local Project Shares Community Development Fund Local Livelihoods Program Electricity Support Water & Environment Benefits 1 Kulekhani I Pays n/a No Local Jobs, Trainings Infrastructure provided and no load shedding Drinking, Fisheries 2 Kulekhani II Pays n/a No Local Jobs, Trainings Infrastructure provided Drinking 3 Marsyangdi Pays n/a Yes Local Jobs, Trainings n/a Drinking, Irrigation 4 Aadhi Khola Pays n/a Yes Local Jobs, Trainings BPC Grid Distribution Drinking, Irrigation 5 Jhimruk Pays n/a Yes Local Jobs, Trainings BPC Grid Distribution Drinking, Irrigation 6 Khimti Pays n/a Yes Local Jobs, Trainings, Local Union MHP plant built and local cooperative established Drinking, Irrigation 7 Upper Bhotekoshi Pays 6% Private Pending Yes Local Jobs, Trainings Infrastructure Provided Drinking 8 Kali Gandaki A Pays n/a No Local Jobs, Trainings Connections to some houses Drinking, Irrigation, Fisheries 9 Chilime Pays 10% Issued Yes Local Jobs, Trainings Infrastructure provided Drinking
Summary of benefit sharing practices SN Project Name Royalty Local Project Shares Community Development Fund Local Livelihoods Program Electricity Support Water & Environment Benefits 10 Middle Marsyangdi Pays n/a No Local Jobs, Trainings 11 Ridi Pays 10% Issued Yes Provided 12 Siuri Khola Pays 10% Issued No Provided 13 Mai Pays 10% Issued Yes Provided Infrastructure provided Preferential tariff and no load shedding Infrastructure provided Infrastructure provided Drinking, Cultural, Enviro Data Drinking, Irrigation None Drinking 14 Upper Marsyangdi N/A n/a No Provided N/A Drinking 15 Puwa Khola I N/A 10% Planned No Provided N/A TBD 16 Kulekhani III N/A n/a No Provided N/A 17 Rasuwaghadi N/A 10% Planned No Provided 18 Upper Tamakoshi N/A 10 % Pending No Provided Infrastructure provided Infrastructure provided Drinking, Attempted Enviro Scheme Cultural, Enviro Data Drinking, Enviro Data
Summary of benefit sharing practices Royalty All projects have paid royalty after commercial operation Rural Electrification Equity shares All Independent power producers registered as public limited company has issued or plan to issue shares Exception: Bhotekoshi as a private company has committed to shares, but modality not clear Separate micro hydro plant Preferential tariff and no load shedding (2) BPC/NEA grid connection (3) Infrastructure support and no load shedding Infrastructure support (8) Not applicable(3)
Summary of benefit sharing practices Employment and training Provided by all projects with preference to locals Community Development Funds 11 / 18 hydropower projects have separate community development funds Water and Environment related Benefits Almost all projects have provided such benefits Drinking water Difficult to allocate separate community development fund for NEA (public) projects and small sized projects Irrigation Agriculture, fisheries Difficult to separate between mitigation and benefits
Scales of Benefit sharing Definition of affectedness tied to benefit sharing Nation Region` District Municipality / village SCALE Individual and families (within affected area) Community user groups Project concerned committee
Temporal aspects of benefit sharing Before Construction During Construction After construction Handing over to government The Royalty Mechanism Equity Investment Local Livelihood: Trainings and jobs Community Development and Local Infrastructure? PES
Commonalities, differences, and concerns What qualifies as benefit? Size of project and community expectations Varying scales of affectedness Differing form of governance Differences in benefit sharing practices with varying ownership structures
Commonalities, differences, and concerns Lack of monitoring Awareness, communication failure and conflict Implications of federal and state restructuring Issues of gender and social inclusion Shifting temporal values of benefits
Conclusion Benefit sharing as an evolving process in Nepal s hydropower development Pluralistic policy terrain Communication to avoid information asymmetry Local development outsourced to hydropower projects??? Energy crisis <> Long term plan <> Environmental risks Not a panacea to solve all the hydropower related problems Lessons for other countries